High Court of Bombay

Gupta Freight Carrier Vs. The Executive Director, West Zone, Zonal Office (West) and Ors.

MANU/MH/1153/2022

05.04.2022

Contract

Order of blacklisting can be scrutinized not only on the touchstone of the principles of natural justice but also on the doctrine of proportionality

The challenge raised in present writ petition is to the order passed by the Food Corporation of India (FCI) terminating the contract that was issued to the Petitioner. Besides such termination of the contract, the earnest money deposited by the Petitioner has been forfeited. The Petitioner has also been debarred from participating in any future tender of the FCI for a period of five years.

In the case in hand, the show cause notice dated 1st October, 2020 has been found to be a proper notice indicating the action of blacklisting being proposed therein. This notice was replied by the Petitioner on 28th December, 2020. It is thus clear that, due notice was given to the Petitioner and the order of blacklisting cannot be questioned on the count that, the Petitioner was not heard before blacklisting it.

An order of blacklisting can be scrutinized not only on the touchstone of the principles of natural justice but also on the doctrine of proportionality. Whether an order of blacklisting is reasonable, fair and proportionate to the gravity of the offence can be examined by a writ Court.

The order of blacklisting has the effect of depriving a party of the privilege and advantage of entering into a lawful relationship with the State for undertaking business. As held in Erusian Equipment and Chemicals Ltd. vs. State of West Bengal, an order of blacklisting has an effect of depriving a person of equality of opportunity in the matter of public contract. An order of blacklisting is equivalent to civil death of the person concerned and is stigmatic in nature. It is with these aspects in mind that the proportionality of the order of blacklisting for a period of five years would have to be viewed.

The Petitioner ought to have been granted an opportunity of hearing at least on the aspect of duration of the period of blacklisting which is five years. It is thus held that, in the present case absence of reasonable and meaningful opportunity of hearing on the proportionality of the period of blacklisting ought to have been granted to the Petitioner and the Petitioner is prejudiced to that extent.

The FCI ought to grant an opportunity of hearing to the Petitioner in the context of Clause 7(iv) of the MTF since the Petitioner has been debarred for a period of five years. Thus, while upholding the decision of the FCI to debar the petitioner for failure to comply with the terms and conditions of Clause 7(iv) of the Model Tender Format (MTF), the Petitioner is liable to be heard on the period for which it ought to be debarred.

The order terminating the contract of the Petitioner forfeiting the earnest money and blacklisting the Petitioner is upheld. The FCI is however directed to grant an opportunity of hearing to the petitioner as regards the period of debarment. Petition partly allowed.

Tags : Contract Termination Validity

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